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Stocks In Focus SG (Cosco, SG Inflation, SIA) – 26/11/13
Over US$400m Worth Of Deals Clinched; Cosco
Singapore listed shipbuilder Cosco Corporation, has clinched more than US$400 million worth in contracts to build two semi-submersible accommodation vessels for Prosafe SE, which is listed in Oslo. A letter of intent was signed by the shipbuilder to build floating hotel-like vessels with Prosafe SE more than two weeks ago. This is the first time Prosafe SE has awarded such a contract to a China shipbuilder. Prosafe SE expects the two vessels to reinforce its position as a world leader in offshore accommodation, which is in line with the company’s long-term industrial strategy. The confirmation received on 25 November 2013 was a possible indication that the initial deposit needed to confirm the contract and to kick start the works has been paid by Prosafe SE. Although Cosco declined to comment on the actual amount of downpayment, a spokesperson said it was better than the industry average currently of some five to 10 percent.
Significance: The new contracts will bring Cosco’s new orders to date to US$3 billion, and its total order book stands at US$7.5 million. The targeted delivery for the vessels is scheduled to be in 2016.
Inflation Pressure Seen Continuing Into 2014
Due to higher food and car prices, Singapore’s inflation is on its way to creep back to two percent in October. Economists believe the upward trajectory of prices will continue into 2014, as higher wages are passed on to consumers. The rise in October’s inflation data was mainly due to a pick-up in certificate of entitlement (COE) premiums, which the government expects it to remain volatile in the short term as the market adjusts to the pending re-categorisation of COEs. Food prices were also the other factor in the equation which increased October’s inflation number. Steeper prices were seen in prices of non-cooked food, more expensive prepared meals at restaurants and hawker centres.
Significance: Daniel Wilson, economist at ANZ noted that rising restaurant prices may be an early sign that this pass through to core (inflation) is intensifying.
Green Light Given To SIA For Launching India Airline With Tata
An official green light has been given by India’s Foreign Investment Promotion Board (FIPB) to Singapore Airlines, to set up a joint venture airline in the country together with Tata Sons. SIA expressed that it received approval from the FIPB on 22 November and will now need to seek further approvals such as a no-objection certificate from India’s Ministry of Civil Aviation and a scheduled air operator’s permit from the Directorate General of Civil Aviation. The investment injected by SIA into the New Delhi-based airline will be US$49 million, while Tata Sons will be putting in US$51 million, in accordance to the respective stakes, where SIA will hold a 49 percent stake while Tata Sons will hold a 51 percent stake. The new airline is expected to take to be in operation by the middle of 2014.
Significance: Although India is a populous country with an emerging middle class to tap on, challenges in operating environment persists as existing carriers grapple with issues such as high taxes and poor infrastructure, which SIA will have to mitigate as well.
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